BOARD AGENDA MEMORANDUM
Government Code § 84308 Applies: Yes ☐ No ☒
(If “YES” Complete Attachment A - Gov. Code § 84308)
SUBJECT:
Title
Receive an Informational Update and Provide Feedback on the Development of Valley Water’s Water Supply Master Plan 2050.
End
RECOMMENDATION:
Recommendation
A. Receive an update on the Water Supply Master Plan 2050 Development; and
B. Provide feedback and direction to staff on the Water Supply Master Plan 2050 portfolio development and analysis.
Body
SUMMARY:
The Water Supply Master Plan (WSMP) is the Santa Clara Valley Water District’s (Valley Water) guiding document for long-term water supply investments to ensure water supply reliability for Santa Clara County. Updated about every five years, this long-range plan assesses future county-wide demands and evaluates and recommends water supply and infrastructure projects to meet those demands to achieve Valley Water’s level of service (LOS) goal through the planning horizon. Valley Water’s LOS goal is “Meet 100 percent of annual water demand during non-drought years and at least 80 percent of demand in drought years” that is established in Board Ends Policy 2.
On September 19, 2023, staff presented the first major update of the WSMP 2050 development to the Board of Directors (Board), including the planning framework, project list, expert panel, and stakeholder engagement plan. This memorandum presents the progress since the last update and includes preliminary portfolio analysis, cost analysis approach, and proposed next steps for developing an investment strategy that ensures sufficient water supply in the face of climate change.
Water Supply Needs Assessment
As presented at the September 2023 update, Valley Water is using a scenario planning approach to analyze four possible futures based on the combination of demand projections and forecasted imported water supplies:
• Stable demand and moderately impacted imported supplies
• Stable demand and severely impacted imported supplies
• High demand and moderately impacted imported supplies
• High demand and severely impacted imported supplies
This approach is intended to account for uncertainty in forecasted future demand and supply and provide an adaptive framework for decision-making. Further discussion on demand projections and the climate impact analysis on future supply and demand is provided in Attachment 1 and 2, respectively, to address questions raised by the Board at the September 2023 meeting.
The first step in developing an investment strategy is to identify future water supply needs in the County and the potential supplies available to meet those needs from our current system. Under each of the four future conditions, water supply needs under the baseline condition were assessed using modeling analysis, to serve as a basis for identifying projects and programs for potential investment. The baseline condition assumes no new investments but completion of local dam seismic retrofits by 2035, achieving long-term water conservation goals, Fisheries and Aquatic Habitat Collaborative Effort (FAHCE) Plus Modified implementation starting in 2025, and maintaining Valley Water assets. The baseline condition analysis simulates how baseline supplies can meet future demands and unmet demand is then estimated as shortage. The shortage evaluation assumes Valley Water meets its water conservation goal through 2050 and can achieve 10-15% water use reduction during droughts for the stable and increasing demands, respectively.
Under all four 2050 futures, Valley Water will experience water shortages if relying only on existing supplies and infrastructure, and the biggest challenge for meeting water supply needs will be multi-year droughts (Table 1). The shortages may start as early as 2030 in the future of severely impacted imported supplies and by 2040 in all four futures. In 2050, if existing out-of-county groundwater banking storage is maintained, the average shortages over a six-year drought could range from 4 to 76 thousand acre-feet per year (TAFY), and the shortages increase as demands increase and imported supplies decrease. If the Semitropic contract is not renewed when it expires in 2035 and/or no alternative groundwater banking is in place, the shortages could get worse, with a range from 30 to 82 TAFY. Valley Water’s current system can handle the first two years of a multi-year drought in 2050, with shortage starting the third year.
Table 1 Average shortage (TAFY) during a six-year drought over planning horizon
12030 demand is the same for Stable and High demands, and Semitropic is in place.
2For this future, the 2030 and 2035 values assume the same demands and imported water scenarios, but Anderson is back online in 2035, resulting in lower shortage than 2030.
The projected shortages represent the targets that future water supply investments aim to meet to achieve Valley Water’s LOS goal. The shortages are large in all futures except the future with stable demand and moderately impacted imports. To address the projected shortage, Valley Water is evaluating potential projects and project combinations (hereafter referred to as portfolios).
Portfolio Analysis Under Alternative Futures
Valley Water is evaluating a total of 18 projects (Attachment 3), including alternative supply projects, local and imported surface supply projects, storage projects, and local recharge and pipeline projects. Since no single project can meet all our future needs and consistent with the planning goal of diversifying water supply, portfolio analyses are used to identify the combinations of projects that may be needed to achieve water supply reliability under each future.
An initial list of over 50 portfolios was developed with different combinations of projects. As the first step in portfolio analysis, those portfolios were evaluated through modeling analysis to determine how they may be able to meet water supply needs across the four possible futures. As expected, the performance of those portfolios varies - some will not address shortage under any future, others will only work for one or two futures, and only a few will work for all four futures. Additional portfolio modeling and further evaluation of portfolios is needed before making investment recommendations. This memorandum therefore includes four example portfolios that can meet future water supply needs under different futures with various levels of groundwater bank storage (Table 2). The first one represents the FY25 rate-setting baseline and can meet supply needs under the future of stable demand and moderately impacted imports. Portfolios #2 and 3 can address the shortages in all but the future of high demand and severely impacted imports, while portfolio #4 is an example of how Valley Water could meet future needs in all four futures without out-of-county groundwater banking (e.g., Semitropic contract not renewed in 2035 and not investing in other groundwater banking).
Table 2 Example Portfolios
1Recycled and purified water, desalination, and stormwater capture are considered alternative supply as defined by CA Department of Water Resources.
While still ongoing, the portfolio analysis so far provides some findings and insights:
• Drought resilient supply such as direct potable reuse coupled with storage is effective in eliminating shortage for all futures.
• Maintaining out-of-county storage is critical in securing water supply reliability, and diversifying storage, in particular improving take/put capacity, is needed to help reduce risk and mitigate drought impacts.
• Some projects work better when paired with other projects, and diversified portfolios could help improve resilience of the water supply system.
• Under each future, multiple options can meet water supply needs, other factors such as cost and reliability need to be considered to compare portfolios and develop recommendations.
• More portfolios need to be explored to provide a full range of options.
Based on these preliminary findings, staff is developing more portfolios and refining the analysis. In addition, staff will conduct a comprehensive portfolio evaluation and comparison as discussed in a later section.
Cost Analysis
Cost is an important factor when developing a recommended investment strategy because of its impact on water rates and affordability. Working with the expert panel and benchmarking with peer agency approaches, staff is developing a cost evaluation approach to enable the comparison among various projects and portfolios. The cost analysis includes total lifecycle cost and unit cost estimates of each project. For each feasible portfolio, the total cost and the water rate impact will also be developed to provide a comprehensive evaluation of the projects from a financial perspective. The lifecycle cost includes capital and annual operations and maintenance costs over a project’s useful service life (30 years for purified water, desalination and pipeline projects and 50 years for other projects, before incurring any significant repair/replace costs). For purified water projects where Valley Water reimburses the wastewater partner for the source water, these costs are included. The unit cost calculation is similar to what was presented at the September 2023 Board meeting. For supply projects, the unit cost is calculated using present values of lifecycle cost relative to the proposed annual supply benefit, while for storage projects, a "storage capacity cost" or cost per acre-foot of storage capacity is calculated.
The portfolio lifecycle cost, unit cost, and rate impact analyses can inform the financial implications of different investment strategies and help select cost-effective portfolios that meet our future needs. In addition, staff will include an overall evaluation of the economic benefits of investing in our water infrastructure. As indicated above, one of the example portfolios presented is the baseline case for this year’s rate calculation, and staff continues to ensure coordination among the CIP, budget and rate calculation, and the WSMP 2050.
Portfolio Evaluation and Comparison
Meeting water supply needs is the most important criteria in evaluating and comparing projects and portfolios, but other factors also need to be considered when making recommendations. To fully capture a wide range of benefits of the projects and address Valley Water’s other needs, a tiered evaluation approach will be used to select portfolios using a list of criteria which was presented to the Board in September 2023 (Attachment 4). With this approach, the first-tier criteria used to filter projects and portfolios is meeting water supply needs and costs. Following the modeling analysis, the cost for each project as well as the portfolios that meet water supply needs will be used to further evaluate and compare portfolios.
To help compare projects with similar benefits and differentiate the portfolios with similar performance in meeting water supply needs, the second-tier criteria will be used. The second tier includes reliability, timing, and readiness/likelihood of success. This step can also help to identify backup projects for each major project to lay the foundation for developing an adaptive management decision tree. Following this step, the remaining criteria, including environmental impacts and environmental justice, can be used to further narrow down the recommendations and identify priorities. At the end of this evaluation process, a decision tree will be developed to identify different pathways and project combinations for the Board to consider. The decision tree provides an adaptive management framework that recognizes the risk and uncertainty associated with large water infrastructure projects and their planned benefits and provide options to respond to changes in future conditions, project benefits, or if projects fail to move to construction.
Outreach Efforts
Stakeholder engagement is an important component of the WSMP 2050 development process and will be carried out throughout the plan development. In October 2023, staff presented major milestones and progress to date at the Water Retailer Meeting and Environmental and Water Resources Committee meeting. Similar presentations were given to the environmentally focused stakeholder group in December 2023, and Agricultural Water Advisory Committee and Joint Water Resources Committee with Morgan Hill and Gilroy in January 2024. In addition, staff will give an update to the Water Commission in late January.
In addition to Board and committee meetings, Valley Water continues to use the WSMP webpage (<https://www.valleywater.org/your-water/water-supply-planning/water-supply-master-plan>), stakeholder email list, blogs, social media, communication newsletter or other channels as ongoing opportunities to provide updates and engage the public and stakeholders.
Expert Engagement
Over the past few months, staff has engaged the WSMP experts to seek their advice on several topics, including:
• Cost analysis approaches and economic benefits of water supply projects
• Water conservation targets and programs
• Recycled and purified water projects
• Project evaluation and scenario planning framework
The input and suggestions from the experts help ensure appropriate approaches are used for the WSMP analysis. Staff will continue to work with the expert panel on key issues of the WSMP 2050 development throughout this year.
Next Steps
Staff will bring a proposed water conservation goal for 2050 to the Water Conservation and Demand Management Committee and is working to develop a potable reuse goal with the Recycled Water Committee. Three options have been identified for the water conservation goal and the middle option has been used for portfolio analysis; however, portfolios will need to be updated depending on the Board approved conservation goals.
The focus of the effort for 2024 is as follows:
• Portfolio analysis and recommendation
• Plan development
• Stakeholder outreach
• Plan adoption
Staff plans to return to the Board with another update in Spring 2024.
ENVIRONMENTAL JUSTICE IMPACT:
There are no Environmental Justice impacts associated with this item.
FINANCIAL IMPACT:
There is no financial impact associated with this item.
CEQA:
The recommended action does not constitute a project under CEQA because it does not have the potential for resulting in direct or reasonably foreseeable indirect physical change in the environment.
ATTACHMENTS:
Attachment 1: Demand Memo
Attachment 2: Climate Change Analysis Memo
Attachment 3: Project Descriptions
Attachment 4: Project Evaluation Criteria
Attachment 5: PowerPoint
*Handout 3.8-A: Sierra Club
*Handout 3.8-B: Miller
UNCLASSIFIED MANAGER:
Manager
Kirsten Struve, 408-630-3138